Do I need to complete a self-assessment tax return?
This is one of those perennial questions we are asked by clients, typically buoyed on by the rash of government adverts around Christmas and the New Year, in the run up to tax return deadline on 31st January. And it is a good question as many individuals may not be aware that they should be completing a tax return.
We regularly speak to people that, for one reason or another, have slipped into the net that either requires them to complete a self-assessment return or because it is in their interests to do so. The last part of that sentence may sound slightly crazy, after all many of us were brought up in an era whereby one only divulged the absolute minimum amount of data to the ‘taxman’ for fear of getting it wrong and winding up with a huge tax bill. But in this modern, increasingly digital tax environment, it can be beneficial to engage with HMRC through the use of a tax return to ensure everything is declared as it should be and so your tax code for the following year is correct – avoiding tax issues snowballing.
Historically the number of people required to complete a self-assessment or personal tax return was limited. But the growth in start-ups, entrepreneurs, the self-employed and a general trend towards having more than one source of income means that nearly 12 million (11.7) people are liable for self-assessment in 2020. There are even instances whereby income from eBay sales and AirBnB rentals have pushed individuals over certain thresholds or had a significant impact on their income across the course of a year.
Terry Smith, our Tax Partner, gives this advice. “Each person’s circumstances will be entirely unique and so there is no blanket answer to the question of ‘Do I need to complete a self-assessment tax return?’. However, there are some rule-of-thumb guidelines that can help you determine if you have to/would be better off, completing a tax return. Some are slightly more obvious than others, for instance if HMRC send you a request to complete a tax return! but in most cases, a tax return needs to be submitted if your circumstances match one or more of the following:
- You are self-employed and earnings exceed £1,000
- You are a company director
- Your annual income is £100,000 or more
- You have income from savings, investments and/or property
- You need to claim expenses or tax reliefs
- You or your partner receive Child Benefit and your income is over £50,000
- You get income from overseas and/or from trusts, settlements and estates
- You have disposed of assets either by sale or gift
- You’ve lived or worked abroad and/or aren’t domiciled in the UK
- You’re a trustee
The Gov.uk website provides further advice and guidance on this matter and there is also a handy checking tool that will help you answer the question, which can be accessed here: https://www.gov.uk/self-assessment-tax-returns/who-must-send-a-tax-return
Do I still need to complete a self-assessment tax return?
The other side of this question is whether you still have to complete a tax return if, for instance, your circumstances have changed and you have moved into employment, having previously been self-employed. Terry says “The answer is broadly the same in either direction. If any of the statements above still apply to you or applied during the last tax year (remember you may be thinking of the year up to and including 5th April last year!) then you probably do still need to complete a self-assessment. If in doubt, complete a tax return as it is better to be safe than sorry”.
If you are required to complete a self-assessment tax return, you’re unsure and would like some advice or you simply want some help in managing your tax affairs, please contact us today and we will be glad to help.